The U.S. August CPI report beat estimates
The U.S. August CPI report beat estimates with a 0.1% energy-restrained headline rise and a big 0.3% core price increase, though the gains rounded up from respective three-digit increases of 0.054% and 0.256%. Firmness was due to a 0.9% surge for medical care costs and another big rise for used car prices, this time of 1.1%. Analysts now have firm 6-month average price gains of 0.209% for the headline and 0.207% for the core. Resumed trade war fears in August accounted for the energy price pull-back, despite core price firmness. In September, analysts expect a 0.1% CPI headline figure with a 0.2% core price rise, as the energy measure captures the tail-end of the August gasoline price pull-back. Analysts expect the y/y CPI gain to rise to 1.8% from today's 1.7% August pace. The y/y core price gain should sustain the August rise to 2.4% from 2.2% in July. The headline y/y metric should climb to the 2.4%-2.5% area by Q1 due to hard comparisons, which kick-in after October, while y/y core price gains stay near 2.4%. For the August PCE chain price figures, analysts expect a flat headline with a 0.2% core price rise that both undershoot the August CPI figures. this should leave y/y gains of 1.4% for the headline and 1.8% for the core. Analysts lowered our Q3 "real" consumption growth forecast to 3.6% from 3.8%, but analysts still expect Q3 GDP growth of 2.4%, after a boost in Q2 GDP growth to 2.2% from 2.0%.